Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Week 2 DQ 1Explain a situation you have observed (or read about) in which a firm made a decision considering irrelevant costs or did not

Week 2 DQ 1Explain a situation you have observed (or read about) in which a firm made a decision considering irrelevant costs or did not consider relevant costs. What was the outcome of the decision, and what could have been done differently?A trucking company with which I am familiar was looking for a more cost-effective way to heat their trucks when on long trips from Michigan to California. During the winter months, the truck drivers would have to leave the engines running to prevent the fluids in the engine from freezing and to heat the inside of the truck so the drivers could sleep. The company investigated installing small generators mounted on the back of each truck that would accomplish both tasks. The miles per gallon saved would be 2-3 miles. Over a 6 to 7 day trip, that amounted to a substantial amount of money. The company believed this was a good investment, so they borrowed the money and installed the generators. However, the company failed to consider the relevant cost of interest. At the time, the company was paying 18% interest on the loans for the generators. Therefore, the company was better off not installing thegenerators as it

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Advanced Financial Accounting An IFRS Standards Approach

Authors: Pearl Tan, Chu Yeong Lim, Ee Wen Kuah

4th Edition

9789814821278, 9814821276

More Books

Students also viewed these Accounting questions

Question

What is a domain name server? What does it do?

Answered: 1 week ago

Question

What reward will you give yourself when you achieve this?

Answered: 1 week ago